Question

Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year: Molding Fabrication Total Machine-hours 32,000 42,000 74,000 Fixed manufacturing overhead costs $ 770,000 $ 270,000 $ 1,040,000 Variable manufacturing overhead cost per machine-hour $ 5.40 $ 5.40 During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs: Job D-70: Molding Fabrication Total Direct materials cost $ 376,000 $ 329,000 $ 705,000 Direct labor cost $ 240,000 $ 140,000 $ 380,000 Machine-hours 23,000 9,000 32,000 Job C-200: Molding Fabrication Total Direct materials cost $ 210,000 $ 290,000 $ 500,000 Direct labor cost $ 120,000 $ 280,000 $ 400,000 Machine-hours 9,000 33,000 42,000 Delph had no underapplied or overapplied manufacturing overhead during the year. Exercise 2-15 Part 2 2. Assume Delph uses departmental predetermined overhead rates based on machine-hours. a. Compute the departmental predetermined overhead rates. b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200. c. If Delph establishes bid prices that are 120% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200? d. What is Delph’s cost of goods sold for the year?

Answer 1

Answers

• All working forms part of the answer
• Requirement ‘a’

Working		Molding Department:	Fabrication Department:
A	Total Fixed Overheads	$              770,000	$             270,000
B	Total machine hours	32,000	42,000
C = A/B	Fixed overhead rate	$                   24.06	$                    6.43
D	Variable Overhead rate	$                     5.40	$                    5.40
E = C+D	Plantwide overhead rate = Answer	$                   29.46 per machine hour	$                 11.83 per machine hour

• Requirement ‘b’

	Job D 70	Job C 200
Molding Department:
Direct material cost	$              376,000	$             329,000
Direct Labor cost	$              240,000	$             140,000
Manufacturing Overhead [machine hours x $29.46]	$              677,580	$             265,140
Fabrication Department:
Direct material cost	$              210,000	$             290,000
Direct Labor cost	$              120,000	$             280,000
Manufacturing Overhead [machine hours x $11.83]	$              106,470	$             390,390
Total manufacturing cost assigned = Answer	$          1,730,050	$         1,694,530

• Requirement ‘c’

		Job D 70	Job C 200
A	Total manufacturing cost assigned	$        1,730,050	$               1,694,530
B = A x 120%	Bid Price = Answer	$        2,076,060	$               2,033,436

• Requirement ‘d’

--Since both the jobs were only jobs completed and sold, the cost of goods sold = total manufacturing cost assigned.

--Cost of Goods Sold = 1730050 + 1694530 = $ 3,424,580

--Answer = $ 3,424,580